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The US dollar gave up ground yesterday on weaker manufacturing activity.
The US dollar got off to a sluggish start to the week after manufacturing activity edged lower in May. ISM manufacturing PMI fell from 49.2 in April to 48.7 — the second consecutive month-on-month fall — as new orders and production slowed.
The dollar’s loss was the euro and pound’s gain, however, as GBP/USD neared last week’s highs. It was all square for sterling against the euro, but EUR/USD also picked up around half a cent.
In Europe, the final read for German HCOB manufacturing PMI came in at 45.4, unchanged from preliminary estimates but well above April’s figure. The eurozone’s PMI was also higher than last month, although the final read was revised down by one tenth of a point.
The Federal Reserve’s Neel Kashkari said over the weekend that interest rate cuts would likely be on hold ‘for an extended period of time.’ Despite this, there are signs in US consumer spending trends that could reassure the Fed it might be time to cut. Household savings rates are at their lowest in 16 months, and Friday’s Core PCE figures were another step in the right direction.
2024 was always going to be a huge test of global democracies, and the pace of global elections is now really starting to ramp up. Over the weekend, South Africa’s ANC party failed to cling on to its majority, which means it must look to form a coalition government for the first time since the end of Apartheid.
India is also on election watch. This morning, it was confirmed that Narendra Modi has secured the expected majority, perhaps even gaining enough seats to bring in broad constitutional reforms. The Indian rupee climbed by around 0.5% against the US dollar as the news percolated.
Campaigning in the UK picked up a notch ahead of the first televised debate. Keir Starmer and Rishi Sunak will face off directly on ITV tonight, exactly one month before polls open.
Elsewhere on the trail, Nigel Farage announced he would be taking over control of Reform UK and will stand in Clacton in the general election.
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GBP: Strong against the US dollar
GBP/USD started the week by climbing around last week’s highs. Those levels were themselves the highest against the US dollar in around two months, although a further climb might be dependent on a more radical rethink of interest rate decision timelines.
GBP/USD: the past year
EUR: Twiddling thumbs
With the spotlight on the ECB later this week, the euro was looking for direction on Monday. EUR/USD showed some strength, but that belies what will be intense scrutiny on Thursday’s policy meeting.
GBP/EUR: the past year
USD: Monday scaries
Far from easing itself into the new week, the US dollar was on the wrong end of some pressure on Monday. Subdued manufacturing data combined with Friday’s figures helped convince some traders that the Federal Reserve was being too gung-ho with its rate talk.
EUR/USD: the past year
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